Abstract

Setting up a venture in an altogether new field of business is not an easy task. Doing a proper market survey to identify the product and find the gap in the present offerings requires a lot of effort. Once this work is done, one has to decide upon the plant location, layout, and finally the set up. The estimation of funds needed for capital and revenue expenditure, buying machinery, and other materials consumes a lot of time and energy. After 30 years of rich experience in the area of sesame seeds and oil trade in Bali, Rajasthan, Harsh found himself in the position of having to look for new opportunities and choosing the right one. The increase in raw material prices (sesame seeds) because of exports, change in customers’ tastes and their liking for refined oil, and the larger slice of the market being in the hands of the organized sector were key factors that led to this circumstance. He tried every possible way to restore his existing oilseeds business but when nothing worked, he finally decided to move into some other sector. After doing a thorough market study, he identified the product — purified drinking water, which he would undertake to supply. At that point of time, this segment was dominated by six players catering to specific sets of customers in the city of Bali. Harsh noticed that because of its high price, the product was not within the grasp of the majority of people. He was of the opinion that if it could be sold at a lower, more affordable price, it would help him to reach the masses. Harsh faced many difficulties in changing the mindsets and educating the people about the benefits of purified water. Over a period of three years, many players entered the purified water business and this led to a price war. Harsh was also affected by this. He had to begin thinking about how to find a way to move forward to increase the customer base and deal with price issue.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand what a Futures contract is
• Understand what a Forward contract is
• Understand the difference between Forward and Futures contracts
• Understand how a Futures contract is used to hedge risk
• Analyze the trade mechanics of the Futures market

Keywords

Cost – Volume Profit Analysis,Break Even Point,Product Identification,Gap Identification,Profitability Analysis,Types of Costs,Entrepreneurship,Decision Making